There are a lot of credit cards out there – and if you’re not doing your research before you decide which credit cards you want in your wallet, you might end up with a handful of credit cards that don’t make sense with your day-to-day purchases and don’t offer the best possible rewards.
Ask yourself these seven questions to make sure you’re choosing the right credit card:
- Why are you applying for a new credit card?
- What is your credit score?
- What types of purchases do you usually make?
- Do you want to use a credit card to help pay off other debts?
- Do you want to make a large purchase and not pay interest immediately?
- What rewards do your current credit cards offer? Is there a gap that needs filling?
- When will you use this credit card – and when will you pull out a different credit card instead?
Why are you applying for a new credit card?
Knowing why you’re getting your newest credit card will help you narrow down your options. People get credit cards for all kinds of reasons, including:
- To increase their total credit limit, which can also increase their credit score.
- To transfer a balance from another credit card and pay off debt during an interest-free grace period.
- To earn more points when paying for flights and hotels.
- To earn cashback rewards on everyday spending.
Ask yourself what you hope to get out of your new credit card, and then use that information – and the following questions – to help you narrow down your options.
Now read our complete credit card guide
What is your credit score?
Like it or not, your credit score is going to affect the types of credit cards you can get – as well as the interest you’ll be charged on those cards. If you have an excellent credit score, you’ll be eligible to apply for premium, high-rewards credit cards. If your credit isn’t great, you may be more limited to cards with lower credit limits, higher APR, and fewer rewards.
Knowing your credit score and what types of cards you’ll be eligible for will help you make smart choices about which cards to pursue – and avoid filling out applications that are likely to be declined.
What types of purchases do you usually make?
If you book a lot of hotel rooms, you might want a reward credit card that grants you double points whenever you book at a certain hotel. If you have a favourite retailer, getting a store credit card could help you save money when you shop. If you want to earn cashback on everything from groceries to petrol, you’ll want to look at the best cashback credit cards. Think about the items you buy in a typical month and look for a credit card that rewards those purchases.
Do you want to use a credit card to help pay off other debts?
If you have a lot of credit card debt, a balance transfer card with a long interest-free promotional period can be a great way to pay off your debt without getting swamped by monthly interest charges. Likewise, a money transfer card can help you with loans and overdraft debt.
In both cases you will usually have to pay a transfer fee of a few percent, but in many cases, it’ll be less than the amount you would have been charged in interest. Once you transfer your balance to the card, try to pay off as much of your debt as possible before the interest-free grace period runs out.
Do you want to make a large purchase and not pay interest immediately?
With a 0% purchase credit card, you can make a large purchase and then pay no interest for a very long period – as long as 30 months right now. Just make sure you can afford to pay off the entire purchase before your grace period ends, otherwise you’ll be hit with hefty APR.
What rewards do your current credit cards offer? Is there a gap that needs filling?
If you already have a credit card that offers you cashback on groceries, you probably don’t need another one (unless it’s offering more cashback than what you’re currently earning). Instead, consider a card that offers you cashback on petrol or at your favourite retailers.
Likewise, if you already have a reward credit card that gives you points that can be used on a variety of airlines and hotels, it might not be worth it to get an airmile credit card that only earns you points on a single airline. On the other hand, if none of your current credit cards earn you airline points, it might be time to add a travel credit card to your wallet! Some travel credit cards give you fee-free foreign transactions, too, which can save you a lot of money over time.
When will you use this credit card – and when will you pull out a different credit card instead?
Knowing which credit card to get is only half the battle. The other half is knowing when to use it. Some people put the majority of their credit card spending on a default card – often the same credit card they started using years ago – but if you aren’t using the credit card that gets you the best rewards on every single purchase, you aren’t taking advantage of everything credit cards can offer.
Before you fill out that application, think about how the credit card will fit into your day-to-day purchases – especially when you’re trying to earn rewards. Don’t be one of those people who gets a great new credit card and then forgets to use it!
Once you have your new card in your wallet, make sure you pull it out for the right purchases. This includes online purchases – if your online accounts are linked to a specific credit card, it might be time to swap out that old credit card for your new card, especially if it offers better rewards. If you asked the right questions before choosing your credit card, you’ll be ready to use this new card to maximise your rewards, minimise your debt, and achieve your financial goals.
Now read our guide on how to use a credit card correctly